Modern Family is apparently a dud in syndication, and no one is laughing harder than Netflix (NASDAQ:NFLX).
It seems that consumer appetite for the show's reruns isn't as strong as Comcast's (NASDAQ:CMCSA) USA Network -- the eventual winner of the comedy's syndication rights -- was expecting. It's been airing the show as many as five nights a week since the fall season began, and the early Nielsen ratings aren't encouraging. USA's audience is 40% lower than it was a year earlier when it was running NCIS and Law & Order: SVU reruns during the same slot.
Digital distribution was front and center in the bidding war for the popular comedy's syndication rights two years ago. Time Warner's (NYSE:TWX.DL) Turner Broadcasting vocally dropped out of contention, arguing that the show was too exposed in cyberspace. Hulu and Disney's (NYSE:DIS) ABC.com -- but not Netflix -- were streaming earlier episodes. News Corp. (NASDAQ:NWSA) COO Chase Carey backed Time Warner's move to pass on the sitcom that had become huge for Disney's ABC.
"A channel's right to say: If I'm going to pay a lot of money for Modern Family I want to buy enough rights so that it's not showing up on a competing platform," Carey said two years ago. "I would not be buying syndication rights to an expensive piece of programming and let it reside on Netflix for 20 million homes."
Carey wasn't knocking the show itself. News Corp. was the show's producer. He was lamenting the growing popularity of streaming earlier seasons of hit shows. Why would someone want to pay up for syndication of earlier episodes when they are readily available -- often without commercials -- through streaming services? This probably played a major factor in keeping Modern Family off of Netflix. It didn't pay off.
A lot has changed in two years. For starters, Netflix is no longer reaching 20 million homes. It has twice as many subscribers worldwide, with more than 31 million of those as domestic streaming accounts. Netflix has also resulted in ratings increases for shows still on the air -- not decreases -- as we've seen with Breaking Bad and Mad Men. Syndication is an entirely different animal, but it needs to be pointed out that several earlier seasons of Law & Order: SVU -- the show that held up better than Modern Family for USA Network last year -- are streaming on Netflix.
Studios and cable networks better learn -- sooner or later -- that Netflix is more a solution than a problem.